*1 503 membership. Clearly, Har- 15, 1988, Hartung attended termination On March pro- full benefit of tung was afforded meeting and addressed the the director’s cedure. Notwithstanding plea, the his members. from the club caused his dismissal record, directors find no review of On March in the letter of governing for reasons stated mem- the rules departure from 2, 1988, Hartung may subject filed ac- May bership he in the club of 4th. On validly complain. contending process of due tion a denial alternatively for prayed reinstatement reasons, foregoing judgment For the recovery expenditures in connection with affirmed. Court is of the Jefferson Circuit membership. his All concur. law, voluntary view the As we right has an unfettered private club pro due members. Neither
chose its own fairness concepts nor of fundamental
cess to associate with
require that one be bound The Ever against his will. See others ALUMINUM NATIONAL-SOUTHWIRE Ma Syndicate, Inc. v. glades Protective COMPANY, Appellant, (Fla.Dist.Ct.App. 262 kinney, 391 So.2d 1980). rela Membership creates an at-will v. participating member
tionship between
ELECTRIC CORPORA
BIG RIVERS
regula
The rules and
and the association.
TION;
Public
Commission
charter
expressed
of the club
tions
Corpora
Kentucky; Alcan Aluminum
membership, and the
bylaws govern
tion;
Corporation;
Electric
River
Green
relat
is the final arbiter of all matters
club
Coopera
County
Electric
Meade
Rural
relationship.
ing
to the
Judi
club-member
Corporation;
Henderson-Union
tive
Corpora
Cooperative
of the
cial
is limited to enforcement
Electric
review
Rural
tion;
Coop
Purchase Electric
Jackson
organization’s
Terrell v.
own rules. See
Corporation;
Commonwealth
erative
American,
Palomino Horse Breeders of
Corporation;
In
Willamette
Aluminum
(Ind.Ct.App.1980).
414
332
N.E.2d
dustries,
Inc.; Utility
Ratecutters
Hartung
judice,
case
sub
Inc.;
Kentucky,
Alumax Aluminum
govern
of the rules
was offered all benefit
Corporation;
Products
Firestone Steel
He con
ing
relationship with the club.
his
Company,
Firestone
division of the
violated, resulting in
tends the rules were
Attorney
Company;
and Rubber
Tire
4th
process1 in that the March
loss of due
of Ken
of the
General
Commonwealth
deci
predetermined
demonstrates a
letter
Utility
By
Through
tucky,
his
hearing.
him
We
sion to dismiss
before
Division;
City of
Intervention
Rate
argument
merit. The
think his
is without
Hawesville, Kentucky;
Hancock Coun
is,
provide only
for notice
Company,
bylaws
ty, Kentucky;
fact
Southwire
heard before actual
Appellees.
opportunity to be
however,
recognize,
United
dealing
expulsion
members. We
Many
social club
cases
with
applica
process.
Bay
upheld
Supreme
of due
Court has
talk in terms
States
Cf.
136,
Inc.,
Hills,
App.3d
City
19 Ohio
law
Anderson
antidiscrimination
of a New York
tion
sense,
(1984).
due
In the traditional
N.E.2d
regularly
payment from
received
a club
where
against
process
protection
action. We
state
Ass’n,
State Club
See New York
nonmembers.
disputes
between
fail to see its relevance
York,
108 S.Ct.
City
487 U.S.
Inc. v.
New
voluntary private social club and its members.
(1988).
aptly stated
As
101 L.Ed.2d
Society, Ky.
County Medical
In Kirk v. Jefferson
concurring opinion,
her
O’Connor in
Justice
(1978),
App.,
our Court talked
ALCAN ALUMINUM
CORPORATION, Appellant,
BIG RIVERS ELECTRIC CORPORA
TION; National-Southwire Aluminum
Company; Public Commission Kentucky; Green River Electric Cor County
poration; Meade Rural Electric
Cooperative Corporation; Henderson- Cooperative Electric Cor
Union Rural
poration; Electric Jackson Purchase
Cooperative Corporation; Common Corporation;
wealth Aluminum Wil Industries, Inc.; Utility Rate
lamette Kentucky Incorporated; Alu
cutters Corporation; Aluminum Firestone
max Company, a Products division
Steel Compa Tire and Rubber Firestone
ny; Attorney General Common Through Kentucky, By
wealth Utility Divi Rate
his Intervention
sion; Hawesville, Kentucky; City of County, Kentucky;
Hancock Company, Appellees.
Southwire 88-CA-1999-MR,
Nos. 88-CA-2001-MR. Appeals Kentucky.
Court of
Jan. 1990.
Rehearing April Dismissed *3 Park, Jr., Randall, Katherine
James Brown, Heyburn, Lexington, Alli- Todd & Wade, Booth, Campbell, Wade and son & Spangenberg, Kilpatrick & Caroline W. Atlanta, Ga., Cody, for Nat.-Southwire Aluminum Co. Jr., Stoll, Forgy, E. Keenon &
Lawrence
Raff,
Park, Lexington
Pub-
and Richard G.
Frankfort,
Kentucky,
lic
Com’n of
Kentucky.
for Public Service Com’n of
Holbrook,
Sandidge,
Ridley
Morton
M.
Holbrook,
Jr.,
Tully,
Ann
Lizbeth
Allen
Wible,
Helmers,
Holbrook,
Sullivan &
Keck,
P.S.C.,
and
H.
Mi-
Owensboro
Paul
Beresford,
Healy,
Douglas
L.
chael F.
P.C.,
Holtzinger,
Washington,
Newman &
D.C.,
Corp.
for
Elec.
Brown,
Harbison,
David C.
Stites &
Louisville,
Overstreet,
Mark R.
Stites
Harbison, Frankfort,
Alcan Alu-
for
&
Corp.
minum
Miller,
Wible,
Holbrook,
Sulli-
James M.
Helmers,
Owensboro,
P.S.C.,
for
van &
Corp.
Elec.
River
Green
Sullivan,
Jr.,
King,
Dorsey,
N.
Frank
Henderson,
Norment,
for
King, Gray &
Co-Op. Corp.
Rural Elec.
Henderson-Union
Cal.,
Mateo,
Taylor,
Wil-
J.
San
Paulette
Bethesda,
Lindsey
Vetter,
Md., liam
Stoll,
Park, Lexington,
Keenon
Ingram,
&
Corp.
Common-
Alumax Aluminum
Corp.
Aluminum
wealth
Hoffman,
Hoffman, Sheffer,
S.
John
Har-
Neel,
A.M.
& Thomason and
Wilson
Henderson,
vey,
require
for Firestone
to pay
Steel Prod-
its customers
for what was
ucts Co.
actually “used
useful” of
Rivers’
generating capacity.
excessive
NSA’s re-
Hawesville,
McCarty,
John
for City of
maining arguments are
the PSC’s or-
Hawesville, Ky.
supported by findings,
der is
that it
Newton, Hawesville,
Harold W.
for Han-
pressure
external
from the
resulted from
County.
cock
(REA),
Rural Electrification Administration
comply
that the order failed
follow or
Watts,
R.
Brandenburg,
James
PSC,
with an earlier order
County
Co-Op. Corp.
Meade
Rural Elec.
discriminatory.
variable rate
Denton,
Keuler,
W. David
Denton &
Pa-
arguments
by at-
Alcan’s main
follow
ducah,
Co-Op.
Purchase
Jackson
Elec.
rate,
tacking the use of a
variable
Corp.
(1)
claims
violates
statutes
*4
Lovett,
Lamar,
T.Wells
Lovett &
Owens-
(2)
discriminatory.
contends
Alcan also
boro,
Industries,
for Willamette
Inc.
the stan-
the new order abandoned
by
order
dards established
the earlier PSC
Meade,
Meade, Louisville,
Don
Miller and
prior
The
explanation
without
notice.
Utility
Ky.,
for
Ratecutters
Inc.
abro-
argument
final
that the new rate
Cowan,
Gen.,
Atty.
J.
Frederic
Pamela
gates
appellee,
contract
Alcan’s
Reilender, Jr.,
and
E.
Asst.
Johnson
Paul
Coopera-
Rural Electric
Henderson-Union
Gen.,
Attys.
Utility
Rate&
Intervention
Corporation.
analyzing these
tive
When
Frankfort,
Div.,
Ky.
thru
for Com.
Utili-
issues,
may be
consolidate them as
we will
Div.
ty and Rate Intervention
appropriate.
portions
We
reviewed the
have
essential
C.J.,
HOWERTON,
Before
and WEST
case,
of the
record in this
and
enormous
WILHOIT,
JJ.
briefs and
have considered the excellent
appendices
parties. We
furnished
all
HOWERTON,
Judge.
Chief
arguments of
have
heard the oral
also
Company
Aluminum
National-Southwire
counsel,
added bene-
of which we have the
(NSA)
Corporation
Aluminum
Alcan
recording for referral.
tape
fit of a video
(Alcan) appeal
judgment
from a
of all of
After serious consideration
affirming an order
Franklin Circuit Court
data,
concludes
majority
panel
of this
(PSC) in
of the Public Service Commission
Circuit
judgment
of the Franklin
No. 9885. The order established fixed
Case
statutory
Court must be affirmed.
Big
power
for all
sold
rates
electric
if
reviewing
is to consider
duty of a
court
Rivers),
(Big
Corporation
Electric
Rivers
or unrea
is unlawful
an order of the PSC
except
electricity
sold to the two
Lexington Tele
278.410.
sonable. KRS
them,
For
the PSC
smelters.
Commission,
phone
v. Public
Co.
rate,
electric
based
established
variable
Nei
Ky.
nine arguments, each similarities in their basic BACKGROUND FACTUAL presented has somewhat different party ru- non-profit, non-stock Big ais Rivers error, dupli- avoiding considerable claims of co- transmission generation and ral electric argument is that the NSA’s cation. lead 75,- approximately serves operative which to satis- electric were established new rates NSA Kentucky. in Western 000 customers rather than to Big debts of Rivers fy the sinking, again filed were largest cus- nancial fortunes Big Rivers’ two and Alcan are 7,1986. The August on for a rate increase PSC issued its At the time the tomers. actions, increase and one one for an two order, regularly pur- two smelters decrease, designat- were consolidated Big percent of approximately 70 chased ed Case No. 9613. output, making NSA total electrical Rivers’ Rivers, Big dependent upon opera- complete and Alcan Wilson was now pend- action was also dependent upon the aluminum tion. The foreclosure Big Rivers were and its creditors ing, and Rivers companies. negotiate a restructur- attempting to debt 1980, Big applied Rivers for a certifi- point of became a focal ing plan which also necessity to con- cate of convenience and purpose hearing the PSC. before generators coal-fired struct two new to reduce the plan was of the workout 1 and 2. A certificate known as Wilson service, pro- for debt required amounts authorizing of both was issued construction preserve the econom- vide rates that would began D.B. plants, and construction Wil- smelters, and to lead to viability ic for the REA funded the son 1 on June foreclosure action. the settlement of the Anticipated growth in Western project. requested the rate relief The PSC denied expected, not rise as did 17, 1987, at on March in Case No. 9613 require- that the load was soon determined case, time, a new the same it established ments for Rivers’ service area investigate Big whole- No. Rivers’ capacity of Wilson not need the additional began its electric rates. sale *5 project can- portion 2. That was plan a revised workout prepare efforts to celled. and to redetermine its needs with REA completion April 1 neared in As Wilson new rates. 1984, Big filed for rate increase Rivers 20, 1987, Big Rivers filed with July On in and
with the PSC Case No. 9006. NSA report, compliance its a business the PSC any rate in- quickly Alcan claimed that together plan, workout plan, and a revised jeopardize their continued crease would data, supporting and suggested with tariffs operate. Big ability to Rivers withdrew a variable rate suggested it also that and 1984, but, request; in that rate November smelt- for the be determined two origi- in again interesting filed for a rate increase Case to note that ers. It suggest- 9163, rate was offering No. to exclude the cost of nal idea for the variable of the aluminum by experts on behalf ed proposed 1 from the increase. The Wilson proposed workout companies. The new again opposed companies two aluminum Big principal its plan Rivers and between any in- proposal, and the PSC denied banks) (REA and two New York creditors crease. 10, August 1987. In this expire to on was pay its Big Rivers was unable to obli- agreed a debt service plan, the creditors 1986, REA, gations January and in REA Interest 350 million dollars. shortfall of outstanding due declared all debts to be payments and to be lowered rates were payment. full It also insti- and demanded longer term. extended over foreclosure action in the U.S. District tuted No. established Case When the PSC Kentucky. of the Western District of 9885, parties negotiate and it ordered the approximately 1.1 Big Rivers’ debts were This out a settlement. attempt to work billion dollars. however, difficult, and proved too filed action In NSA an October role in taking a more active began PSC requesting decrease elec- with the PSC con- between the to strike a balance order assigned No. tric This case was spe- rates. The retained flicting interests. ap- electric rates in 1985 were employed experts 9437. The to audit and cial counsel Rivers, NSA, As It also re- per mils kilowatt hour. and Alcan. proximately Big design and any expert rate to evaluate not been allowed tained an Rivers had The smelters. for the appropriate fi- tariffs years, and since its change for several hearings held in Frankfort from Au- The that its order were PSC claims in Case No. gust 4 through August attempted the equities to balance fair, just to reach a result. record, including previous The entire interests, balancing the PSC con- cases, incorporated by reference for pro- in No. sidered 9613 and No. 9885 the No. Case 9885. The PSC's order Case posed plan, workout condition 9613, establishing 9885, No. four allowed Rivers, the condition of the aluminum negotiation, study months for and the smelters, the of REA and role the smelters fair, provided just, order that reason- deciding to build Wilson the interests expeditiously rates able would be set at payers, other of the residential and rate period. end of order that four-month The coopera- fact and the is a 10, 1987, in 9885 on August was entered tive owned its members are its who proposed plan the date the workout customers. expire. was to creditors rely The order Case does not No. A fact but significance, of uncertain targets, flow on cash but a minimum complain about which NSA and Alcan The debt service schedule. order acknowl- 9, 1987, heavily, April is that on REA edged agreed to a REA debt service placed embargo cooperative on all loans dollars shortfall 350 million and that might vari- otherwise be available to plan require revised should additional operations Kentucky. ous This was during increases service for debt negotia- during study done the time for plan. anticipated term of The PSC also tion, during pending the time off-system electricity sales of acknowledged foreclosure. help grow payment sys- in the for the embargo to be was an external factor operation. its tem and PSC acknowl- with, dealt but it also determined that the edged off-system projections ap- embargo controlling was not a issue. NSA peared plan. to be realistic in the new sought finally re- delay hearing to specifically question solve the of rates until REA lifted The PSC “found” that inclusion of aluminum smelter embargo, the PSC denied that re- variable power important rates are an new feature quest. *6 likely the
which will make it more that in PSC’s Order Case No. 9885 stay will in alu- smelters business when prices There testimo- minum are low. was being Since order 9885 is chal- the ny in the record that a variable rate would lenged, it is essential for this Court to weathering greatly assist the smelters briefly points. some of major summarize its market the down turns in the aluminum quite acknowledged It the case was that highly- part of a which are inevitable complex, Big Rivers in arrears on that was cyclical industry. dollars, approximately debts by billion in a fore- Big and that its assets were involved The Rivers’ PSC also found expressed The order linked to solvency inextricably closure action. future was smelters. It concluded the economic future of Western the health the provided a fair Big Rivers, the PSC new structure linked to that the was problems long-term Big resolution of Rivers’ financial indicated that the existence just and provided The reasonable must be considered. and that NSA Alcan clearly The order weigh the rates for its customers. sought then and balance PSC Big approve everything that Rivers competing conflicting did not interests. Big requested, and note that Rivers 9613, the refused to In Case No. and Alcan when complainant NSA useful” apply the “used and in the Franklin Circuit case was filed exclusively, not it would and it did indicate Court. The single, rigid apply other standard. flexible PSC further found controlling for standard rate determination findings of NSA 278.030(1), what that stan- rates were based is found in KRS merely could pay, and not on what rates.” should just dard is and reasonable “fair, arrearages of 350 million dol- existing permissible pay. The PSC determined projec- not be exceeded. “unjust, un- lars would in 1981 were rates established early high prices aluminum tions for and insufficient.” Only tell if proven correct. time will to be rate, the PSC indicated As to the flexible substantially prices decrease. will time, the likely produce, over “the rate cooperation from all required The order of revenue that would be same amount to balance parties. The aim was overall conventional, rate. flat produced under gener- fairly the needs and interests III, witness, Pifer Dr. Howard V. NSA’s customers, ator, creditors. and the alternative, ‘as an testified that ... help- significant concessions REA made rates for could set innovative commission Big Rivers. ing problems to resolve link electrici- smelters which the aluminum prices’.” Other wit- ty prices to aluminum required No. 9885 The order Case rate, also recommended the variable nesses it was conditions be met before three if either smelter found that September placed into effect on flat rate dur- due to a burdensome closed First, accept the re- had to the creditors recession, consequences Big for ing a approved rates. plan vised workout and the and the other customers would Next, action had to be dis- the foreclosure disastrous. missed, required were and the creditors pres- acknowledge that Rivers was paid establishing a variable rate to be embargo Finally, REA’s ently default. point companies, pivot the aluminum Kentucky co- assistance for all of financial 32 mils. The for electric rates was to be operatives had to be lifted. companies pay per kilowatt would 32 mils average price at such times as the world finding that the old rates In addition per pound. unreasonable, aluminum was 62 cents For unjust and the PSC were aluminum, price rise in each one cent are specifically found that the new rates electricity price fair, specifical- would rise 0.7 just reasonable. It also ceiling plan mils to a of mils. For each one will ly that the revised workout found pound, per cent fall below 62 cents Riv- provide long-term resolution to electricity price drop by 0.8 mils the eco- financial difficulties and that ers’ per to a floor of 18.1 mils. These stability kilowatt NSA and Alcan will be nomic rates were less than Rivers had re- by the variable rates which enhanced quested, they higher than price were also of aluminum. tied to the market pay. NSA or Alcan wished to companies and the aluminum Big Rivers encouraged Big The order Rivers and in the Franklin Circuit complaint filed a negotia- companies to continue of the PSC. challenging the order tions, agreed willingly ex- and the PSC Court affirmed The Franklin Circuit *7 haye proposed changes. order, companies The order amine the aluminum and hearings posture for future to consid- in the appealed. Big also allowed Rivers is now deflation, things and er such as inflation or PSC’s order. supporting the changes in the cost of coal. especially of the Franklin Circuit Judge Graham thorough determined that the variable for his The PSC is to be commended Court produce opinion deciding an excess for this case rate formula should and excellent early generally concur August debt service 1988. We the minimum on but, as we have some project- opinion his years prices aluminum were with when appeal on this anticipated and as the issues high. that differences ed to be PSC variations, and will consider some we in the fu- have prices would become lower reasoning the resolution of present our the earlier The order indicated that ture. error. allegation each pay- early some high prices would allow principal and interest. ment of additional OF REVIEW STANDARD subsequently prices if Even earlier, our standard mentioned lags, the PSC As was drop, and if the debt service 278.410(1). in KRS is set forth for review that the maximum nevertheless determined provides property The statute that an cost of used and order structure the not allegation commission or useful. that may be vacated set aside Another related is only if the court finds it to be the Franklin unlawful PSC and Circuit parties portion challenging applying unreasonable. The erred in of the doctrine proving Hope order have the found Power burden unlawful- in Federal Comm’n v. Co., ness or unreasonableness clear and sat- 320 U.S. 64 S.Ct. Natural Gas (1944). isfactory evidence. To doctrine KRS 278.430. 88 L.Ed. That unlawful, held the order must violate a is that it is the result reached rather than employed controlling. state or federal statute or constitutional the method is which and provision, an order is unreasonable if it Although arguments we believe supported by is not substantial evidence public prece- policy some basis in our and the evidence leaves no room for a dents, nevertheless must conclude that we among of opinion difference Kentucky neither nor Ken- statutes Energy Regulatory minds. Comm’n v. tucky place such case law restrictions Co., Ky.App., 605 Ky. Power S.W.2d 46 fulfilling duty to estab- PSC when fair, just lish We and reasonable rates. outset, At the conclude that we the order agree concept of and use- that the “used fair, reasonable, just is that find- application ful” an has had adequate, ings are and that the order extent, making. appears rate To some rates are supported new substantial evi- part public that policy of our to insure gigantic dence in this record. The order utility pay do not consumers unreasonable arbitrary big or unreasonable. The rates do unrea- and that utilities not make are the order questions whether is other- agree expansions. sonable We do not adopted wise lawful it was and whether however, argument, smelters’ a lawful manner. historical of “used somehow the given overriding, must be useful”
THE ISSUES application. A all-encompassing determina- tion of is used and useful is one what Among presented the issues and remain- many considered factors which should be allegations ing to be resolved establishing note that when rates. We also statutory guide- failed to follow recognized applied the Kentucky has lines, compa- that it the aluminum denied Hope in some recent cases. doctrine more law, process nies due and that the order appear put Although may that the PSC discriminatory. argues Alcan also horse fixed no the cart when it before abrogates the order its contract with primarily specific value for Any one of Henderson-Union. these alle- satisfy plan, set a workout correct, gations, challenge if be a gave nevertheless conclude that the PSC We the lawfulness of the order. will con- applicable adequate consideration to all sider each of issues. these factors, including the used useful facil- unique factu- very ities of This Rivers. I. us to also conclude al situation causes argue NSA and Alcan first flexibility in its some the PSC must have by setting erred rates based on fairly rates bal- efforts fix such considering first Rivers’ debts without produc- conflicting interests of the ance the *8 excess, 1 is an unneeded whether Wilson electricity er of and the consumer. nor facility that is neither used useful states, as and Penn- support Some such Indiana servicing In of this customers. require es- sylvania, apparently continue to Kentucky stat proposition, they claim that recovery of rates which allow require be based on a utili tablishment utes that rates property only portion utility’s of a using only assets on the property value ty’s completely and almost presently which is They useful. further which are used and indi- Federal allow prohibits used useful. cases Kentucky case law allege that deciding significant through vidual latitude utility recovering its rate states exchange of but to affect they choose to utili- uitable value what method establish ty consumption, production, rates. and distribution behaviors, create markets.” The and even equipped are not to establish Our courts concludes, at 335 with this state- article rates, only the meth- utility and we review public pay should indeed ment: “[t]he role activity. ods and results of PSC Our gets get pays for. what it what it lawfully the rates are is to ensure that explained and precisely this is more Unless fair, they just and established and that are however, agencies applied, and courts will reasonable, based on the evidence. KRS means used and useful for other overlook 278.030(1). in- Our Court’s role is also to accomplish particular end results conflicting interests of all sure that utility they parties concerned with rates are fair- desire.” this, ly accomplishes If the balanced. Although Kentucky statutes contain the judg- no reason to our we have substitute useful,” Ken- term “used and and some simply or because it ment reverse tucky cases have limited rates based strictly adhere to the histori- has failed to al- was “used and useful” and not what concept “used useful.” cal recovery capacity, lowed for much excess Hoecher, Autop- “Used and do not find that our statutes and cases we Useful": Energy Law sy Making Policy, a Rate Indeed, they mandate such limitations. (1987), the author of the article Journal restrictively. A should not be construed so concept indicates that the of used and use- strict adherence to “used and useful” is not alive, may ful too is still be well. if necessary the courts to determine Close examination of the and a PSC rates are lawful and reasonable. usefulness has reevaluation been review, public protected by judicial bewill prompted by some failed or cancelled nucle- resulting rate should and the ultimate power plants may may not ar some important more consideration than prudently constructed. In his have been determining specific, method for mandated conclusion, Hoecher wrote at "... it. deny used and useful cease to utilities ac- controlling utility rate- statutes ratepayer’s purse simply cess to the be- 278.030(1) making and KRS 278.- are KRS utility actively cause á asset was not em- 278.030(1) KRS authorizes utilities ployed and no immediate service or benefit “fair, just reasonable rates.” collect being supplied.” at He also concluded “pre- the PSC to KRS 278.270 authorizes 333: just and rate” when it scribe a capital utilities commit reason- [W]hen “unjust, unrea- existing finds rates to be ably prudent pursuit obligations of their sonable, insufficient, unjustly discriminato- convey to invest in future service and to ry in violation....” or otherwise present as rate- benefits to future as well payers, agencies may decide to afford fixing pertains also KRS 278.290 rate treatment or cost of service language base utility rates. The is broad provid- recovery to investments not then generally permissive as to what factors so-called ing service to consumers. Such only reference to consider- consider. The departures from and use- traditional used is “used and useful” ing property which ful, called risk allocation or whether specifically applies to The section else, something do not often contravene servicing investigations for a rate of used and purpose and rationale municipalities, and it allows or more two ratepay- useful when the interests of in rates be- differentials for reasonable ing public generally are taken into ac- might one ar- municipalities. While tween count. requires limit on gue the statute used recovery for assets which reasoned, 334-335, flexi- At Hoecher “[t]he interpretation useful, find such bility Hope in the formula trans- inherent unwisely restric- unnecessarily myriad ratemaking practices lates into a *9 eq- only to insure an tive. that will seek not
512
Comm’n, Ky.,
Alcan arguing an investor-owned wa- step further Fern Lake involved statutory scheme a “system” Chapter developed system in a system. that the definition of a ter It had recovery of utility’s limits a rates to a was needed. The which far exceeded what 279.010(8) and useful. KRS what is used the excess facilities court did declare that “means and in- provides system that a not allow and useful and did were not used works, plant, prop- facilities and cludes establishing in a rate as a factor them erties, parts appurte- thereof and and all cite Blue Grass appellants base. The also thereto, gener- or useful in the nances used v. Public Service Telephone Co. State ation, or distribu- production, transmission (1964), Comm’n, Ky., 382 which S.W.2d energy.” We find no clear tion of electric Fern Lake. reaffirmed co-op “sys- this definition of a reason from absolutely neither case is We believe that interpretation that requires an tem” which For one controlling for various reasons. only property used and must value language such as “should thing, they use rates, setting utility especially useful include,” substantially less which is property with the Each case is also “must not include.” than may fully utilized be valued. which is in that utilities were distinguishable both 278.290(1), legislature gives In KRS cooperatives, investor-owned rather than establishing guidance to the PSC this bankrupt- utility approaching neither in connection with utility property value of the “used and cy, application and an reads, part: rates. It appropri- somewhat useful” standard was any property under fixing In the value of simply ate for those cases. subsection, shall the commission application mechanical not shackled to a history and give consideration to the due standard. the used and useful proper- development utility and its or the by the PSC find no error We cost, reproduction as a ty, original cost of application in its Franklin Circuit concern, structure, and oth- going capital Hope, supra, doctrine. Hope recognized by the of value er elements reads, at 287: “Under opinion at 64 S.Ct. rate-making purposes. of the land for law ‘just and reason- statutory standard of the PSC broad dis- appears This to afford method not the it is the result reached able’ in rate- considered cretion factors controlling. employed which [Citations enough to making. certainly It is broad im- theory is not the It omitted.] cost, things replacement such as consider At order counts.” pact of the rate cost, retirement, and at operating debt Kentucky cases more recent least two in- capacity in order to excess least some Hope. cited dur- adequate service continuation of sure po- rel. Hancock and some ex ing periods high demand In Commonwealth Co., Ky., expansion. It also growth and Bell Tel. tential for Central South expan- Hope and (1975), of whether the court cited for consideration allows S.W.2d 659 impru- a to set aside prudently were seeks sion investments at “one who ruled made, particular body utili- regulatory dently public and whether order of cooperative opera- making a con- or a ty heavy is investor owned burden carries might ex- these factors is invalid Any showing the order vincing tion. varying situations in its tremely significant and unreasonable unjust it is because ultimately would determining what ex rel. when In Commonwealth consequences.” Co., rate and fair, just and Tel. be a Bell Central Stephens v. South balancing of interests. again (1976), allow for the court Ky., 545 S.W.2d 930-931, at and declared Hope, cited companies argue The aluminum just and rea- non-confiscatory, “[rjates are prohibits a Kentucky case law also utility to long they enable so as sonable property not cost of its recovering the finan- successfully, to maintain leading operate They cite as their useful. used and com- and to capital integrity, to attract cial v. Public Service Fern Lake Co. case
513 the general rule, Hope law follows for the risks as- federal pensate its investors clearly the doctrine and indicates doctrinal sumed. ...” application of away from an the “used shift developing 9885, In in the PSC the rates in theory useful” all cases. Federal principles Hope. follow the in attempted to statutory requirements rate rates The considered the workout PSC financial reasonable,” opinion The in “just and be Rivers, Big of plan, the financial condition Light v. Jersey Central Power & Co. Fed- problems the condition of the financial Comm’n, Regulatory 810 Energy eral companies, the role of REA and aluminum (D.C.Cir.1987),analyzes 1168 several F.2d companies in the decision to aluminum at then concludes 1177: federal cases and 1, prudence of the con- build Wilson teaching straight- of these is The cases of the struction of Wilson the interests reviewing In a rate order forward. rate-payers, and the residential and other courts must determine whether or not Big cooperative fact is owned Rivers a a the end result of order constitutes by its who are also customers. members balancing, on factual based The con- specifically found that findings, investor interest in main- imprudent of Wilson 1 not struction taining integrity financial and access to and that: inter- capital the consumer markets is not a sta- Wilson half-finished nuclear being charged non-exploitative est in revenue-producing, is a tion. It state-of- those choices must still add rates. ... may capable the-art coal-fire unit that be up to a reasonable result. long enough producing run of rev- opinion p. reads: At part system of to enue as Rivers or in the repay portion possibly [Pjlacing prudent a all investments rate substantial policy seem a more sensible the creditors’ investment. would base application of “used and than strict The totally ignore did not the used useful,” it approach under this is the simply and useful case. It this used, investment, property and not the it apply in as strict a manner as refused having is viewed as been taken requested by the In- companies. public. The investor interest de- deed, useful, is used but if all, an after is interest Hope, scribed concept, any problem it has current in return on investment. capable producing is it that it is more cases, all, energy being many although not presently electric than mar- rate is However, appropriate keted. for the PSC to population some be more would growth Kentucky, determine a value for before in Western or the addi- first recovery setting such alu- invest- tion of another consumer as an plus plant, operating minum to ment costs. value Rivers would have any unreasonable, begin considering not include use- the construction of Wil- should electric, by the consum- Any utility, son 2. time a excesses to be borne whether less water, public policy, statutes and gas, capable is our sewer ers. While protect is seek consumers producing peak clearly at situa- cases what demanded tions, do not providing any paying for facilities which ben- capable it is not them, goal is to the real for the PSC growth potential the area it serves. efit fair, just and reasonable rates. There no an establish way to add additional would and there is no litmus test for this growth or even There is industry substantial single prescribed accomplish not like no method population. Certainly, Wilson 1 is goal. plant, it is defi- incomplete nuclear nitely facility. useless panel conclude that majority of this required objective and the PSC met
Federal decisions leave to the states need remand the case rate-setting methodology there no decision of what needs, findings. Duquesne for additional While meets individual best clear concern for the Barasch, good to see more Light U.S. Co. consumer, proof As a a clearer burden 609, 102 S.Ct. L.Ed.2d producer capacity drops price If show that excess faster than it rises. *11 investment, prudent per pound, price was a and a clear find- 62 cents below exists, ing just electricity may drop per how much excess we are to 18.1 mils kilo- Furthermore, satisfied with the result. watt. the non-smelter rate- payers rate have two increases scheduled Having thoroughly, case reviewed this during 10-year life of the order. Their we hold that the rates in Case No. 9885 are per final to mils rate will be closer the 32 neither The unlawful nor unreasonable. kilowatt. parties reasonably interests of all are bal- providing expert attempted pro- anced. Rivers is alive and is The to witnesses good, dependable system, average payment years electric which vide an over 10 to the smelters must have. There is excess what the smelters and balance non-smelter capacity dependable provide pay electricity. to and ade- customers The variable quate electricity peak at times of or ex- designed require rate was to the smelters demand, potential treme and there is pay electricity to more for when aluminum population growth. some industrial and prices high, they likely are when can afford consumers, are in who essence the pay protect more. The variable rate will case, paying appropriate owners are high production the smelters from costs keep system going, rates to and the prices are also when low. We creditors have contributed a fair share to encouraged Big note that the Rivers help solve the financial crisis. negotiate and the smelters continue to of their If that settlement differences.
We affirm on this issue. happen, not and if the rates does variable unreasonable, prove to unrealistic and II. reopen may the PSC the case. We find next im NSA Alcan attack the nothing or in the unlawful unreasonable position They argue of a rate. variable order. Kentucky statutes and that violates against it discriminates them. We con By selling percent output of its statutory clude that there is no violation Alcan, Big definitely Rivers is NSA any discrimination is either and that too to the aluminum The for- linked business. acceptable uncertain or that it is within producer of the and the consumer tunes limits. dependent on each other. The variable protect the rate is a reasonable effort to companies The aluminum claim that the of each. As counsel for the PSC interests only setting not PSC erred variable argued, the smelters and Rivers them, by establishing but also living together beginning, from the been wrong “pivot point.” rate at the The PSC In they have now been married. Case pivot expected average point set the at 32 expert No. 9163 in NSA’s witness average per mils kilowatt when the world adopt a “rate recommended that the PSC price per pound. for aluminum is 62 cents spot market which fluctuated with pivot point NSA and Alcan claim 9885, the price of aluminum.” corresponding price to the non-smelters agreed to do that. that, pay They argue mils. then will is 27.6 rates, 10-year over the life of the ordered actually ex- if some discrimination Even million dollars. they pay will an extra 76 ists, per prohibit not law does 278.170(1), According se. to KRS accurately agree disagree No one can prejudice or disad- prohibit “unreasonable allegations, only time will tell with these as difference.” vantage” or an “unreasonable accuracy estimates or the of the PSC’s 278.030(3) classifi- de- KRS allows estimates. The variable rate smelters’ service, patrons, and rates If cations for pends price on current of aluminum. use, period considering the “nature average price 10-year over used, used, the time quantity average quality per pound, 62 cents under any other reasonable used ... and “pivot point” on the could be when rate based consideration.” than 27.6 mils. The variable rate less consequences potential of this situa- Although buy power electric the smelters Ken- large quantities, big parties for all and for Western they place demand tion note, however, provide tucky unin- were monstrous. We Rivers continuous terrupted ready pressure coming completely make service to be amounts of REA and the circumstances created available on demand enormous gives Big energy. applied pres- its actions. NSA its own Wilson this, ability to must to close its smelter and do NSA Alcan sure with threats help pay writing newspaper at- for it. its letter tacks. *12 leading
Perhaps
on rate discrim
the
case
County
ination is Louisville & Jefferson
also
During
argument,
oral
we
E.
&
Joseph
Seagram
Met Swr. Dist.
engaged in some
learned that the PSC had
Sons,
413,
(1948).
Ky.
211 S.W.2d
parte efforts to resolve the
problems in
ex
challenged the
Several sewer customers
situations,
case.
In some
such action
this
they
rates on the basis that
were
new
condemnable,
might
appears
it
but
At
discriminatory.
211 S.W.2d
the
parte
the PSC’s ex
done
efforts were
with
reads,
the
opinion
validity
“...
if the
of
parties,
each of the
and such
were
efforts
fairly
judg
Board's action be
debatable its
basically
purposes
for
of mediation
prevail against
ment must be allowed to
find
error
finding.
fact
We
no reversible
objection that
dis
the
the classification is
resulting
activity.
this
from
criminatory.”
opinion adds
the
Although open hearings
adjudi-
and some
Metropolitan Sewer District was vested
involved,
making is
cating are
basical-
legislative
with
discre
administrative
function. Commonwealth
legislative
ly a
PSC, likewise,
legislative
has
tion. The
Stephens v.
Tel.
ex rel.
South Central Bell
and administrative discretion.
Its variable
Co.,
supra, held that courts need not
in-
special
rate and
smelt
classification
the
legislative proce-
into
quire
the wisdom of
being
ers is fairly debatable as
sound and
malice,
dures,
they
by
unless
are tainted
for all
not
concerned. We will
corruption.
primarily
or
con-
fraud
We are
disturb that decision.
product
cerned with the
and not
the
with
produced
or
it.
motive
method which
III.
Dist.,
Met. Swr.
Louisville &
Co.
Jefferson
process
claims that
its due
NSA
fraud,
supra. We
find no
malice
taint
rights were violated
the PSC es
because
PSC,
corruption by the
and none is al-
or
tablished the new rates under
ex
extreme
Rather,
leged.
commend the
we should
pressure
argues
ternal
from REA. NSA
members of the PSC and their counsel
right
that its
is
have an
most essential
product they
hammered out.
finally
impartial
appearance.
tribunal in fact and
reasonably argue
suspicion
its
may
NSA
certainly
disagree,
cannot
We
but when we
tribunal,
impartial
just
of an
facts
totality
consider
circumstances
any
wrongdoing
support
do not
actual
case,
in this
need not
the PSC
reverse
agreed
its
PSC.
to lower
interest
REA
judg
or
order
the Franklin Circuit Court’s
longer
payout.
rate and to a
PSC
Likewise,
ground.
on
no
ment
this
we see
relief
REA lifted its
the rate
until
withheld
necessity
remanding the case
a new
embargo
loans and dismissed
hearing
may may
capable
against
action
Rivers.
its foreclosure
happening
pressure.
without
requested by
The new rates were less than
Certainly,
pressure
there
settle
was
satisfy their
REA and
Rivers to
work-
nightmare.
was in default.
plan.
evidence that
out
There
no
action,
REA had filed a foreclosure
any
special
in 9885 was tainted
order
placed
embargo on
to Ken-
had
loans
REA,
dealing
or be-
between
PSC
However,
tucky
has
cooperatives.
no one
any party.
the PSC
tween
wrongdoing,
accused the REA of
as
dispute
fact that it would
pursuing
rights
credi-
will not
merely
as a
We
if
could have
been
the rates
tor.
better
fixed
atmosphere
been
without the
rejected
The order in 9613
argument
foreclosure,
embargo or
rate-making
but REA could that
simply
an exercise in
'
drop
not have been
applying
forced
either action.
a “used and useful” standard.
merely
If the PSC and REA had
put
remained NSA
Alcan were
on notice of that
purposes,
provided,
at cross
fact when the
foreclosure could
must
“[w]e
finalized,
carry
complex balancing
have been
out a
possible
equities
and it is
the REA could
allocation of risk.”
have taken over the
This is what was final-
ly accomplished
and fixed its own rates.
in 9885.
Arkansas Elec-
tric Cooperative Corp. v. Arkansas Public
We also
fail
see how
authorization
Comm’n,
Service
U.S.
103 S.Ct. of rates
satisfy
sufficient to
a debt service
Even
utilities are similar to
from all
being
owned utilities as
wisely
differently
moved
treated
forward on schedule to
for-profit,
quick finality
obtain
invester-owned utilities. In
establishing the
rates,
City
Covington
and it was
v. Public
able to balance the inter-
Comm’n, Ky.,
(1958),
parties.
ests of
court
at 393-394:
utilities,
publicly-owned
the case of
IV.
appears
the
that
trend is to determine
Another
alleging
issue
a denial of
requirements
revenue
on the
basis
process
due
is raised
NSA and Alcan.
actual
needs.
cash
[Citation omitted.]
argue
changed
Both
that the PSC
the stan
approach,
municipally-
Under
fixing
dards for
rates as set
in
out
the
owned
awith bonded indebtedness
order for
Case No. 9613 without
notice
charge
must be allowed to
sufficient
explanation
the
how
would actu
rates
rates to meet the interest and amortiza-
ally
in
be fixed Case No.
fur
9885. NSA
requirements
[Emphasis
tion
of its debt.
alleges
changes
ther
from
resulted
original.]
in
pressure
the extreme external
applied by
While we are aware of differences
disagree
REA. We
and find no reversible
way
request
ap
in
this rate
the
has been
error.
proached in the four or five times it has
argument
This
complain
continues to
PSC,
been
the
before
we find no unreason
about the
the
require
fact that
new rates
able inconsistencies or unlawful arbitrari
rate-payers
pay
the
capac-
to
for the excess
Although
expressed
ness.
we
some criti
ity of Wilson 1. The
did set the
new
cism of the PSC’s methods in this case and
high
give Big
enough
rates
to
suggested some other methods for most
pay
reasonable chance to
its debt to REA
utility rate-making,
many ap
the PSC has
plan;
under the terms of the new workout
propriate rate-making methodologies avail
but,
already
since we have
decided that
it,
able to
and it must have some discretion
Kentucky
neither our
statutes nor our Ken-
choosing
in
the
for each
best one
situation.
tucky
require
or federal decisions
the
Telephone
v. Public
Citizens
Co.
application
smelters’ restricted
of “used
Comm’n, Ky.,
transmission
WILHOIT, J.,
in part,
concurs
dissents
cooperative
contract
for the
has a
separate opinion.
part, and files
power.
buys power
purchase
NSA
through
Corporation WILHOIT, Judge, concurring
part
Green Rivers Electric
electricity
purchases
through
Alcan
part.
dissenting
Coopera-
Electric
Henderson-Union Rural
great
I
dis-
respectfully
With
reluctance
Corporation.
permit
tive
Both contracts
opinion.
part
majority
sent
from
rates. Each contract
the PSC establish
springs
apprecia-
This reluctance
an
part
provides
that rates
electric ser-
enormity
immediacy
tion
changes
subject
may
such
as
“to
vice
presented
problem
this case
effect from time to time
be authorized into
(PSC) and the
Public Service Commission
Public Service Commis-
impressive
body
of that
to reach
efforts
sion.”
solution, not
equitable
mention
*14
years
given
contracts were for 20
ef-
thoughtful
to those
consideration
they
changes
contemplated
by
rate
the
by
Circuit
and the
forts
the Franklin
changes
“force majeure.”
PSC or
due to a
so
I
majority here.
I do
because
be-
Furthermore, Kentucky
generally
law
by
the
which the rates were
lieve
method
utility
subject
are
holds
contracts
to rate
into
have failed to take
appears
reached
PSC, no
changes
by
ordered
the
matter
important
account
well-established
provide.
what the contracts
Board
Ed
failure,
it
public
policy
because
County v.
ucation
reviewing
William
to ascer-
impossible
is
for a
court
of Jefferson
Dohrman,
Inc., Ky.App.,
N.W.2d bearing decision no whatsoever
Hope has the “used and useful” which majority public policy. of our part Light in Jersey
decision Power & Central Regulatory Energy v. Com
Co. Federal
mission, (D.C.Cir.1987),not F.2d binding on this precedent offers no
question, persuasive but fails to furnish why our
precedent policy, as to equal balancing right of
forces an at public to be served
charge against right of the property value of
fair return on the service, exchanged in that should
used policy heavily toward weighted
for a more
ensuring a return on invest investors their
ment. majority
I a variable concur with upon appellants
rate for the the facts
presented not be unrea- unlawful or
sonable. Hummel, Kinney, Kevin P. Dennis J. setting I case would remand this for a Louisville, Coan, appellant. Hummel & upon rates based a rate base determined public Ken- policy accordance with the Abell, III, Mary Rudy Ross Terry, Irvin tucky. Bisciotti, Brown, Heyburn, Louis- Todd &
ville, appellee. HOWERTON, C.J., and
Before MILLER, JJ. GUDGEL MILLER, Judge. judg- summary from a appeal
This entered in the Jefferson Circuit ment RAY, Appellant, Marcus L. Court. working Ray Marcus L. was shot while SYSTEMS, INC. HARDEE’S FOOD Har- by appellee, *16 a restaurant owned at Hardee’s, Appellee. d/b/a Inc., Systems, d/b/a Hardee’s dee’s Food “Hardee’s”.) (hereinafter No. to as 89-CA-0832-S. referred ar- minutes before the Approximately five Appeals Kentucky. Court of assailant, Roger Sue Payne, rival Bratcher, off-duty employee, Hardee’s Feb. spoke telephoned the restaurant Discretionary Review Denied supervisor. From McCarty, shift Kim by Supreme Court var- testimony the witnesses point, 18, 1990. April she considerably. Bratcher testified ies coming kill Mar- McCarty “Roger is told gun.” “I he will think cus” stated simply Bratcher McCarty testified going kick butt.” Marcus’ “Someone